Building The Dream: The One Where We Lose Tons of Money (again)

I promised I would blog every part of our home-building journey for our own records and for other people thinking of starting this process. In case you are wondering where we stand in the whole house-building situation right now...we've hit a pretty major road block. 

So...we happen to be a young family in a time when the economy is horrible. Especially  the housing market.

Some background:
When we got married and bought our first house in 2006 everything was honky dory and we got a great deal on our first house as a married couple. We read a bunch of books and listened to the advice of several professionals. Buying real estate is a great investment, blah blah blah. That house appraised for almost $40,000 more than we paid. Plus we had a large down payment from selling the house I owned when I was single. Our mortgage was MUCH less than the appraised value of our house. We totally thought we were being smart and responsible.

CRASH! Did you hear that? That was the sound of the housing market hitting rock bottom.

We lived in Florida, one of the states that was hit the fastest and the hardest.

In two years the value of our home dropped by over $100,000.

In those two years we had also adopted Nicholas and gotten pregnant with Abby. We were 1,000 miles away from family and the company that Eddie was working for at the time offered us an opportunity to move back home.

We knew it was going to mean losing a lot of money, but we felt like (and still feel like) it was the right decision.

Thankfully, my dad owns an asset management company and we were able to get our second mortgage for our Pennsylvania house through his company and he helped us eat most of the loss on our Florida home.

We bought our current home with the mindset that at least it was probably the bottom of the market and we could fix it up and get some equity. 

Nope. 

Since then, the market in PA has only gone down. We bought this house knowing it was not our forever home and also knowing that my dad planned to retire in a few years and liquidate his assets and that, when he did, we would either need to refinance or move because his company would no longer be available to hold our mortgage.  We figured there would be equity for a remodel or a refinance or a down payment.

That time has come, but, nope. There isn't.

We met with a Realtor recently and we are going to need to be prepared to lose tens of thousands of dollars (again). Selling and moving is still the best option because when you refinance they only want to give you 80% of the appraised value of the house, and the current appraised value is much less than what we paid. That would mean losing even more money just to stay in our current house, the house we always had the intention of selling anyway. 

Also, the banks have changed their policies about building and construction loans. Until recently, they let you borrow while you still lived in your current home, under the assumption you would sell when your house was built. They also used  to let you defer your payments until construction was complete and everything converted into a regular mortgage.

Nope. They don't do those things anymore.

We are in a good position, though, unlike so many other families our age. We are fortunate that we come from generous families and we are also fortunate that, despite some circumstances beyond our control, we have been as responsible as possible with our money.

We have excellent credit and a decent amount of savings. We have all of the necessary approvals, the only change is that now they want us to sell our current home before construction begins.

My mom had the idea to invest in the land with us so that she can build her own house on it eventually and gave us a large early inheritance, knowing that building our forever home will be an invaluable gift to her grandchildren. She wants to see them grow up surrounded by land and space to breathe and be secure in knowing we don't have to go through this tumultuous process anymore almost as much as we do.

My dad and step-mom have offered to take whatever our loss from our current home will be and deduct it from our inheritance from them so that we don't need to eat that money up front.

Eddie's parents have offered us a place to stay after this house is sold while construction happens on the new home. It will mean he will be commuting almost two hours to work every day, but it will be temporary. 

So now, even though it has been almost a year since we first found our lot...we wait.

We wait until this house sells and we lose a whole bunch of money (again), but we know that just like the last time, in the end it will be worth it.

If we had it to do over again, we would have rented homes up until this point in our lives, but we had no way to predict what would happen. We didn't know that we would need to be writing checks equivalent to a year's salary or two years of college tuition just to be able to move. We certainly didn't know we would have to do it twice.

Although it is extremely stressful to be going through this process again, it is a necessary evil. We are building the new house as a place to stay forever. A place to stay at least until the mortgage is paid in full and the only reason to sell is that the kids are grown and we want to down-size to a nice maintenance-free condo in a retirement community. A place where there will be enough space for our children to one day build their own houses on the same property if they chose so that they don't need to go through this b.s.

Unfortunately, there is no time to sit around and wait for the market to pick back up and, as we have learned the hard way already, there is no guarantee that it will. My dad is preparing for his retirement now and our children are growing and starting school.

So here we go again.

Bleck.